Disney Drops Most Since 2012 After Goldman Downgrade: L.A. Mover

By Andy Fixmer -
Jun 20, 2013

Walt Disney Co. (DIS), the world’s biggest
entertainment company, dropped the most since November 2012
after Goldman Sachs & Co. downgraded the stock.

Disney slid 3.7 percent to $61.98 at the New York close.
The stock fell the most among the 30 companies in the Dow Jones
Industrial Average (INDU), which declined 2.3 percent after the Federal
Reserve said it may cut back its bond purchases. The shares
have gained 24 percent this year.

Disney’s ESPN faces rising costs for sports broadcast
rights and new competition from News Corp. (NWSA)’s Fox Sports 1, which
begins airing in August, Drew Borst, an analyst at Goldman
Sachs (GS), wrote in a report published today. He lowered Disney’s
rating to neutral and removed the Burbank, California-based
company from the firm’s “conviction buy” list. Borst didn’t
change his 12-month price target of $70.

ESPN, which provides about 45 percent of Disney’s operating
income, will be less profitable next year due to the higher cost
of airing NFL football, Major League Baseball and college
sports, Borst wrote. Fox Sports 1 will drive up prices by
competing for TV rights. ESPN’s NBA basketball contract expires
after the 2015-2016 season and its Nascar rights expire next
year, he wrote.

Disney’s cable channels, including ESPN and ABC Family,
produced $5.7 billion in operating income on revenue of $13.6
billion in the fiscal year that ended Sept. 29. In that same
period, Disney reported total operating profit of $9.96 billion
on $42.3 billion in revenue.